Notes/Observations
Action-packed week ahead with Chair Yellen’s last FOMC meeting, President Trump’s State of the Union and heavy data highlighted by US payrolls on Friday
Asia:
Bank of Japan spokesperson noted that Gov Kuroda’s comments at WEF panel were intended to repeat the BoJ’s official view that it expects to meet its 2% inflation target around FY19
China National Development and Reform Commission (NDRC) saw 2018 GDP growth between 6.5-6.8%
Europe:
ECB’s Knot (Netherlands): central bank has to end its QE program as soon as possible, arguing that there’s not a single reason anymore to continue with it – Chancellor Hammond/Brexit Sec Davis/Business Sec Clark sent open letter to British businesses which reiterated pledge for speedy agreement on Brexit transition phase
Aims to reassure British companies who have called for more clarity on the Govt’s Brexit plans – German IG Metall union: 5th round of regional wage talks ended with no deal; Leadership had decided to call for 24hr strikes (as speculated)
Fitch affirmed France sovereign rating at AA; outlook Stable; Austria sovereign debt at AA+ with stable outlook
Americas:
President Trump will use his State of the Union address to build momentum for legislation on infrastructure and immigration (**Note: scheduled for Tuesday, Jan 30th)
Economic Data:
(DE) Germany Dec Import Price Index M/M: 0.3% v 0.2%e; Y/Y: 1.1% v 1.1%e
(FI) Finland Jan Consumer Confidence: 24.2 v 24.0 prior; Business Confidence: 16 v 17 prior
(ES) Spain Dec Adjusted Retail Sales Y/Y: 1.2% v 2.2%e; Retail Sales (unadj) Y/Y: 1.5% v 3.2% prior
(IT) Italy Dec PPI M/M: 0.0%e v 0.4% prior; Y/Y: 2.2%e v 2.8% prior
(IS) Iceland Jan CPI M/M: -0.1%e v +0.3% prior; Y/Y: 2.4%e v 1.9% prior
(AT) Austria Jan Manufacturing PMI: 61.3 v 64.3 prior (24th month of expansion)
Fixed Income Issuance:
(IT ) Italy Debt Agency (Tesoro)sold €6.5B vs. €6.5B indicated in 6-month Bills; Avg Yield: -0.417% v -0.457% prior; Bid-to-cover: 1.39x v 1.43x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 – 0.2% at 399.8, FTSE flat at 7669, DAX -0.4% at 13287, CAC-40 -0.2% at 5521 , IBEX-35 -0.5 at 10544, FTSE MIB -0.2% at 23820 , SMI -0.2% at 9497, S&P 500 Futures -0.3%]
Market Focal Points/Key Themes: European Indices trade mostly lower this morning, tracking the declines in US futures after record closes on Wallstreet on Friday. News flow has been quiet ahead of a busy earnings week with Siemens, Vodafone, ING and Royal Dutch Shell some of the names reporting. AMS in Switzerland outperforms this morning after a sharp Revenue rise; To the downside Petra Diamond, Santhera and Bankia trade lower following earnings. In the M&A space Sanofi trumped Novo Nordisk by acquiring Ablynx in a €3.9B deal. Elsewhere RELX acquired ThreatMetrix for £580M and Schmolz + Bickenbach received court approval for the acquires of parts of Asco Industrials. Looking ahead notable earners include Seagate, Adient and Dominion Energy.
Movers
Consumer Staples [Conviviality [CVR.UK] -8% (Earnings)]
Financials [ Bankia [BKIA.ES] -3.3% (Earnings) ]
Healthcare [Santhera Pharma [SANN.CH] -3.3% (Earnings), Getinge [GETIB.SE] -6.2% (Earnings), Abylnx [ABLX.BE] +21%, Novo Nordisk [NOVOB.DK] -1.1% (Ablynx to be acquired by Sanofi for €45/shr) ]
Materials [Petra Diamond [PDL.UK] -8% (Prelim results, cuts outlook) ]
Technology [Wirecard [WDI.DE] +1.3% (prelim earnings), AMS [AMS.CH] +17% (Prelim FY17)]
Speakers
ECB’s Praet (Belgium, chief economist): Policy will be data-dependent. Domestic price pressures remained subdued; ample degree of monetary accommodation was still needed
ECB said to will accept Spain Fin Min de Guindos to vice chancellor position if there is a consensus
Japan Currency Head Asakawa: To continue to monitor FX market closely; checking what was behind moves; should avoid FX competition; (in-line with G7 rhetoric). Reiterated that would not target FX for competitiveness and that excessive, disorderly moves had bad effects. FX volatility had increased and watching for nervousness or speculative moves
China PBoC Dep Gov Yi Gang: 2018 GDP growth expected to remain on a stable path. Debt and leverage ratios were too high . PBoC to study inclusion of shadow banking into MPA
Iraq State Organization for Marketing of Oil (SOMO) chief: jan exports seen between 3.5-3.55M bpd
Currencies
USD began the week with a small bit of retracement after six straight weeks of losses as FX speculators have been short of dollars. There are a plethora of key events during the week that could account for some of the squaring of USD positions dominated the data agenda, with the Janet Yellen’s swan-song FOMC meeting, the ISM data and then the monthly payroll jamboree to come, as well as the State of the Union address. Overall dealers believe that upcoming US economic data won’t turn the tide of dollar weakness. Also dealers noted that rise in US bond yields was doing little to support the greenback
EUR/USD in today’s session probed near the lows registered in the aftermath of Trump’s reply to the weak dollar environment last week. The pair tested 1.2385 before inching back above 1.24 in quiet trading. (President Trump noted late last week that the USD would strengthen as the economy did)
USD/JPY was only marginally higher and unable to remain above the 109 level in a quiet session.
Fixed Income
Bund Futures trades down 59 ticks at 159.22 as the German five-year bond yield touches 0%, highest level since 2015. Continued upside targets 162.00, while a move lower targets the158.75 low.
Gilt futures trade at 122.43 down 13 ticks as the 10-year yield hits the highest level since Feb 2017. Support continues to stand at 122.25 then 121.75, with upside resistance at 123.75 then 124.33.
Monday’s liquidity report showed Friday’s excess liquidity rose to €1.874T from €1.872T prior. Use of the marginal lending facility fell to €50M from €0M prior.
Corporate issuance saw 2 issuers raise $2.6B in the primary market.
Looking Ahead
(BR) Brazil Jan CNI Consumer Confidence: No est v 100.5 prior
05:25 (BR) Brazil Central Bank Weekly Economists Survey
06:00 (IE) Ireland Dec Retail Sales Volume M/M: No est v 2.6% prior; Y/Y: No est v 6.8% prior
06:00 (IL) Israel to sell Bonds – 06:45 (US) Daily Libor Fixing
07:00 (RO) Romania to sell 1.35% 2019 Bonds
07:30 (BR) Brazil Dec Total Outstanding Loans (BRL): No est v 3.064T prior; M/M: No est v 0.4% prior; Personal Loan Default Rate: No est v 5.4% prior
08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week
08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Dec Personal Income: 0.3%e v 0.3% prior; Personal Spending: 0.4%e v 0.6% prior , Real Personal Spending (PCE): 0.4%e v 0.4% prior
08:30 (US) Dec PCE Deflator M/M: 0.1%e v 0.2% prior; Y/Y: 1.7%e v 1.8% prior
08:30 (US) Dec PCE Core M/M: 0.2%e v 0.1% prior; Y/Y: 1.6%e v 1.5% prior
08:55 (FR) France Debt Agency (AFT) to sell combined 4.3-5.5Bin 3-month, 6-month and 12-month BTF Bills
09:00 (BE) Belgium Q4 Preliminary GDP Q/Q: No est v 0.3% prior; Y/Y: No est v 1.7% prior
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tend
10:30 (US) Jan Dallas Fed Manufacturing Activity: 25.4e v 29.7 prior
11:30 (BR) Brazil Dec Central Govt Budget Balance (BRL): -25.0Be v +1.3B prior
11:30 (US) Treasury to sell 3-Month and 6-Month Bills
15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to cut Overnight Lending Rate by 25bps to 4.50%
16:00 (KR) South Korea Feb Business Manufacturing Survey: No est v 82 prior; Non-Manufacturing Survey: No est v 78 prior
16:45 (NZ) New Zealand Dec Trade Balance (NZD): -0.1Be v -1.2B prior
18:30 (JP) Japan Dec Jobless Rate: 2.7%e v 2.7% prior; Job-to-Applicant Ratio: 1.57 v 1.56 prior
18:30 (JP) Japan Dec Overall Household Spending Y/Y: 1.5%e v 1.7% prior
